Acknowledgement:
Contents
Corporate social responsibility
CSR practices at BHP
CSR practices at Tesco Plc:
Conclusions:
Bibliography
CSR and the competing business interests of corporations
Introduction
The organisations of the twenty-first century are more accountable to their stakeholders than ever before. While the investors, shareholders and financiers are interested in the economic profitability that the business generates, the general public, local community, non government organisations and the government is concerned with the social benefits that the business could provide. Corporate social responsibility refers to the way organisation plan and carries out their relations with the stakeholders. CSR as the term is popularly referred to is imbibed in the principles of sustainability and the 3Ps of planet, profit and people. An organisation must manage its sourcing, production and distribution function in a way that economic profits get maximised along with maximum benefit to people and no harmful impact on the environment (Glavas & Aguinis, 2012). As business entities are forced to adopt the concept of CSR in their day to day business activities, the challenge to be economically obliged to investors while being socially obliged to other stakeholders arises. In this essay, two organisations that are trying to maintain a balance between economic and social interest and therefore remain accountable to their stakeholders, are being discussed.
The two companies dealt in this essay are BHP Billiton and TESCO Plc. BHP Billiton is the leading natural resources manufacturing company in the world. The Global Reporting Initiative (GRI) framework mandates public companies to produce a sustainability report highlighting the sustainable business practices that they have carried out. In line with the stakeholder theory, organisations have begun to be accountable for their economic and social profitability to the various stakeholder groups (Global Reporting Intiative, 2010).
Corporate social responsibility
Business entities are the infrastructure of the society and therefore their activities have a direct and indirect impact on the society that could be positive or negative. Business ethics are based on the principles of utilitarianism, which means engaging activities that benefit maximum number of people, libertarianism, which means freedom to engage in any activity, deontology, the ethical principle of observing duties and moral ethics, which means being morally responsible to the society (Carroll & Buchholtz, 2011). Business has to think beyond their economic self interests in doing maximum welfare to the society and observing moral rules laid by the society (Welford, 2013). According to economist, Milton Freedman, the only interest that a business should have is the economic interest to earn more profit and not social interest. According to him, if managers have to be responsible to shareholders they have to maximise their profits and this can come at the expense of the social cause (Nelson & Schwartz, 2008). The model advocated by Freedman was the stockholder model. However it is also true that shareholders may change but what remains stable is the goodwill that a business earns over time and that is its biggest asset. The CSR theory, in a way, challenges the stockholder theory proposed by Freedman. The stakeholder model believes that senior management should balance the interests of its varied stakeholder groups. The model says that business entities must balance social duties and profit (Srisuphaolarn, 2005).
Importance of CSR
The recognised international standard body for CSR is the ISO 26000 standards. The ISO 26000 standard provides ample clarity on the organisation’s scope and nature of social responsibility engagement. The standard therefore helps organisations to contribute to sustainable development of the society (Schema, 2014) . The standard analyses trends and characteristics of social responsibility. An organisation that adheres to the socially responsible behaviour in the maximum interest of its people and the environment is given the standard.
The main reason for CSR practices to grow in every business entities is the amount of benefits that it brings to the companies. Organisations gain by maintaining healthy relationship with the stakeholders. The goodwill and the reputation of the company increases as its perceived social benefit is as large as its economic profitability (Broomhill, 2006). It is a perceived notion that by engaging in CSR the company only benefits the society. However on true grounds it is seen that the company benefits equally by engaging in this practice. By being conscious of the environment, many companies are producing innovative products that are green nod involve less use of energy, water or other resources. For instance, Unilever bought out their hair conditioner and shampoo range that required very less water. This kind of an innovative product becomes a success and thus a business generates huge revenues. The entities are able to different their brand from that of the competitor by projecting their sustainable initiatives. It is in the long term interests of the company to remain sustainable. CSR practices are found to be engaging employees in a useful manner and therefore motivating them (Sharma, et al., 2009).
(Baker, 2004)
An organisation that strives to attain the CSR standards is trustworthy and transparent in its operations and consumers will naturally prefer its products or services. Responsible corporate governance practices, necessitates the top management to identify any scams, frauds or loopholes that could be damaging to the company. The economic success of the business is achieved by engaging in actions that would affect stakeholders at large. For example, when companies engage in the development of the backward local communities, they tend to stimulate growth in such backward areas, which a few years down the line benefits the company immensely. Another area that companies’ focus , is the sustainable procurement of raw materials or input for production. The entities should ensure that their procurement practices benefit the suppliers or the farm producers in certain cases, who would get a higher value for their produce. Food retailers engage in responsible procurement that leads to enhanced economic compensation for farm producers and limits the time needed to bring the produce to buyer’s market (Eweje, 2014).
CSR practices at BHP
It is one of the biggest multinational corporations with operations in several countries of the world. The company is headquartered in Australia and has a significant operation in UK as well. The UK Division is called BHP Billiton Plc. Being a mining and resources company, BHP Billiton takes sustainability to the heart of its operations. Sustainability is highlighted as one of the topmost priority for the company under the BHP Billiton Charter. The sustainability values highlighted under this charter serves as a guide to the company’s behaviour and guides in organisational decision making. Being a global company with significant operations in almost all countries in the world, the company has to interact with a range of stakeholders and address their issues while contributing to their sustainable development. The CSR program encompassed a series of sustainability targets that had to be integrated into the business and had to be achieved towards the end of the financial year. The current focus of business sustainability is towards improving safety and health practices by targeting zero fatalities at the work place (Kitzmueller, et al., 2012). The company has a zero tolerance policy towards child labour, forced labour, discrimination and ill-treatment of employees. People and their well being is one of the top most priority of the company’s sustainability program. The environmental considerations are essential in the company’s sustainability strategy as its mining operations could pose significant health hazards to communities living around. All operations must be conducted in a way to minimise greenhouse gases emissions and reduce the impact on biodiversity and the ecosystem (The Guardian, 2013). In the year 2014, the company in compliance with The Energy Efficiency Opportunities Act took several energy efficiency measures. For instance, in the Worsley Alumina operation the process variability decreased and downtime increased. This form of energy efficiency would help in minimising the cost of operations at the factory level for the company. The company is also promoting responsible water usage. It was also ensured that the toxic wastage in the form of tailings do not get deposited in water bodies near the factory and therefore the company took due measures to ensure that the wastage is disposed off safely (BHPBilliton, 2014).
Sustainability at BHP is all about giving back to the society from where it takes its important resources needed for the business. The company invested US$242 Million in voluntary community programs for 2014. Almost 8700 employees participated in the Matched Giving Program which is a CSR initiative. BHP Australia has been striving to work with the indigenous communities of the region by encouraging their skill based development and providing them with employment opportunities. The company is also working on preserving the cultural heritage of the places where it has its operations. For example in Chile, the company supported the modernisation of the Chilean Museum of Pre Columbian Art, which shows the work that the business is doing towards preserving the cultural heritage of the communities where it works.
The company’s CSR policies have had a good reputation despite the bad history of the company. The company adheres to the reporting standards set for the Sustainability reporting. If a company has to gain credibility among the stakeholders then it must duly disclose its process, practices, procedures and any assumptions made while reporting (Clark, 2007). Being more open to public scrutiny through the sustainability reports and the mandatory GRI reporting, companies tend to make all disclosures and avoid the risk of running into trouble with stakeholders and regulatory authority. BHP boasts of its reputation and credibility that it has gained owing to its CSR practices and adequate reporting standards. This reputation among stakeholders ensures that they all share a strong relationship with the company. This will automatically make the organisation more profitable than what it was.
CSR practices at Tesco Plc:
Tesco PLc is one of the biggest retailers in the world with operations in more than 12 countries. The company’s operations are the largest in the UK, where more than 3300 stores o f the brand are present. The significant size of the company has earned it a big stakeholder base comprising of more than 50 million customers and thousands of suppliers. Therefore the challenge of addressing the most important issues of the society like hunger, food wastage, unemployment and poverty are being seriously considered by the retailer. Being a retailer one of the most important pillars to its CSR strategy is better and sustainable engagement with its suppliers. The other important priority is to reduce food wastage. This is one of the company’s CSR ambitions (TESCO, 2014). The company has developed a core program which would convert the waste to better recycled products for the ecosystem and also work towards reducing the food that gets wasted. For instance under a part of this program, the company sends its wasted bakery products to units where they get converted to animal feed and used for feeding livestock, while the cooking oil gets converted to biodiesel. As a business sustainability practice the company publishes the food wastage report monthly which would show the amount of foods that gets wasted from its store on a daily or monthly basis (Guardian, 2014). Food wastage is the biggest problem for retailers, producers and other distributors in the food and beverage industry and the loss from wastage could amount to about $460 billion annually. The company’s initiatives in preventing huge food wastage are commendable. The company believes in giving back the society sustainability for the benefits in the form of resources that it has reaped from them. Another ambition of the company is to create new job opportunities for young people around the world by designing vocational training for improving the skill sets of almost 73 million youngsters who are unemployed (Environmental Leader, 2013).
The company adopts a partnership approach of working with the suppliers and local businesses at the local level. The responsible sourcing policies ensures that the farmers at the end of the value chain get their dues fairly. The carbon footprint of the business is also reduced considerably under the sustainability program, by increasing the area of their stores which consequently led to decrease in net carbon intensity. In September 2012, the CDP UK, named TESCO as one of the top ten green companies operating in the UK for the initiatives to manage the climate change phenomena. Companies like TESCO have significant bottom line reimbursements coming in the form of success following the CSR strategies. For instance, CSR strategies have led to better sales and higher market share for many companies like TESCO. By employing these strategies the company has managed to contain employee attrition and have highly motivated employees working for them (McElhaney, 2009).
The CSR strategy of the company is to earn the trust of the consumers by responsible to them and the communities served, by maximising benefits and minimising any negative impact due to its operations. The CSR strategy of the company is aligned with the company’s performance (Deveximpact, 2013). In these reviews the risks and opportunities to the business through the implementation of the CSR policy is being discussed. This case example proves that a very profitable retailer like TESCO can balance its CSR strategy and profit strategy to command a big share of the retail market. However the recent scandals of the profit being inflated by GBP 263 million have raised questions on the corporate governance objectives of the company. With the chairman Sir Richard Broadbent leaving the organisation, it is left to be seen how the company fights to regain its image (NY Times, 2014).
Conclusions:
From the above discussion it can be said that corporate social responsibility is indispensable for business organisations of the twenty-first century who have to balance their economic objectives with the socio-environmental objectives. Sustainability gets its meaning when production happens in a manner that is beneficial to the company’s economic objective and to the society’s wellbeing. Some of the paybacks in employing the CSR strategies for business are superior access to capital, minimised cost of capital and better company image. Increased community involvement by the company helps in improving the reputation of the company. In this way it is seen that CSR activities undertaken for the society helps generate significant returns for the company. These CSR activities should reflect in the day to day business practices of the company and without which the entire exercise would be futile.
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